Homeworx Franchising v. Meadows et al
REPORT AND RECOMMENDATIONS re 62 MOTION for Default Judgment as to defendant(s) Counterdefendants Axis Pointe Inc and Blum Capital Partners, 58 MOTION for More Definite Statement, 57 MOTION to Dismiss Amended Counterclaim: magistrate judge recommends granting 58 Motion and denying 57 and 62 Motions. Objections to R&R due by 10/28/2010. Signed by Magistrate Judge Paul M. Warner on 10/13/10 (alt)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
HOMEWORX FRANCHISING, LLC, a
Utah limited liability company,
REPORT AND RECOMMENDATION
DODGE MEADOWS, an individual, and
STEVE HOFER, an individual dba
HOMEWORX OF DENVER,
Case No. 2:09cv11
DODGE MEADOWS, an individual,
HOMEWORX FRANCHISING, LLC, a
Utah limited liability company; AXIS
POINTE, Inc.; BLUM CAPITAL
District Judge Dale A. Kimball
Magistrate Judge Paul M. Warner
This matter was referred to Magistrate Judge Paul M. Warner by District Judge Dale A.
Kimball pursuant to 28 U.S.C. § 636(b)(1)(B).1 Before the court are the following motions: (1)
HomeWorx Franchising, LLC (“Homeworx”); Axis Pointe, Inc. (“AxisPointe”); and Blum
See docket no. 39.
Capital Partners, LP’s (“Blum”) (collectively, “Counterclaim Defendants”) motion to dismiss the
amended counterclaim (“Amended Counterclaim”);2 (2) Counterclaim Defendants’ alternative
motion for a more definite statement;3 (3) Dodge Meadows’s (“Mr. Meadows”) motion for
default judgment as to AxisPointe and Blum.4 The court has carefully reviewed the memoranda
submitted by the parties. Pursuant to civil rule 7-1(f) of the United States District Court for the
District of Utah Rules of Practice, the court elects to determine the motions on the basis of the
written memoranda and finds that oral argument would not be helpful or necessary. See
As an initial matter, because Mr. Meadows is proceeding pro se, the court will “construe
his pleadings liberally and hold the pleadings to a less stringent standard than formal pleadings
drafted by lawyers.” Riddle v. Mondragon, 83 F.3d 1197, 1202 (10th Cir. 1996).
Homeworx is a nationwide franchisor of post-construction service franchises. On or
about January 9, 2008, Mr. Meadows, Steve Hofer (“Mr. Hofer”), and Eric Barr (“Mr. Barr”),
dba Homeworx of Denver (collectively, “Defendants”), entered into a franchise agreement
(“Franchise Agreement”) with Homeworx. In its complaint, Homeworx contends that by
November 2008, Defendants were in serious breach of the Franchise Agreement. Specifically,
Homeworx alleges that, inter alia, Defendants breached the Franchise Agreement by failing to
See docket no. 57.
See docket no. 58.
See docket no. 62.
pay fees and royalties to Homeworx, misusing and disparaging Homeworx’s trademarks, failing
to provide monthly reports, failing to have managers and employees properly trained, and failing
to secure and maintain required insurance. Homeworx also brought state law claims for libel and
slander against Defendants. In response, Defendants filed an answer and counterclaim
(“Original Counterclaim”) alleging, inter alia, breach of the Franchise Agreement by Homeworx,
fraudulent inducement, fraudulent misrepresentation, interference with Defendants’ business
relations, and violation of the covenant of good faith and fair dealing.5
Defendants were originally represented by counsel. However, on July 15, 2009, counsel
for Defendants filed a motion to withdraw from representing Defendants,6 which was granted by
Judge Kimball.7 Defendants requested, and received, thirty days to obtain alternate
representation.8 Rather than obtain new counsel, Defendants apparently determined to appear
pro se in this case. However, the court notes that Mr. Meadows is the only defendant to have
Defendants did not specifically set forth separate causes of action in the Original
Counterclaim. However, based on the court’s review of the Original Counterclaim and the
Amended Counterclaim, the court has identified the above-mentioned causes of action.
See docket no. 25.
See docket no. 28.
entered a pro se appearance.9 Mr. Barr was previously dismissed from the lawsuit,10 and Mr.
Hofer has filed a bankruptcy petition in Colorado.11
In a Memorandum Decision and Order dated February 4, 2010 (“February 4 Order”), this
court granted Mr. Meadows’s motion to join AxisPointe and Blum as counterclaim defendants.12
The Amended Counterclaim against Counterclaim Defendants was filed March 23, 2010.13 On
March 31, 2010, Counterclaim Defendants filed a motion to dismiss the Amended Counterclaim
and an alternative motion for a more definite statement.14 On April 12, 2010, Mr. Meadows filed
a motion for default judgment as to AxisPointe and Blum.15
I. Counterclaim Defendants’ Motions
Counterclaim Defendants argue that the Amended Counterclaim fails to state a claim
upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6). In the alternative, Counterclaim
Defendants move the court for a more definite statement. See Fed. R. Civ. P. 12(e) (“A party
See docket no. 36.
See docket no. 20.
See docket no. 61.
See docket no. 53.
See docket no. 54.
See docket nos. 57 and 58.
See docket no. 62.
may move for a more definite statement of a pleading to which a responsive pleading is allowed
but which is so vague or ambiguous that the party cannot reasonably prepare a response.”).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim for relief that is plausible on its face.’” Ashcroft v. Iqbal, --U.S. ----, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). A court should “assume the factual allegations are true and ask whether it is plausible
that the plaintiff is entitled to relief.” Gallagher v. Shelton, 587 F.3d 1063, 1068 (10th Cir.
2009). “While the complaint does not need to include detailed factual allegations, ‘factual
allegations must be enough to raise a right to relief above the speculative level.’” Carson v.
Tulsa Police Dept., 266 F. App’x 763, 765 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 555).
Thus, “the complaint must give the court reason to believe that this plaintiff has reasonable
likelihood of mustering factual support for these claims.” Ridge at Red Hawk, L.L.C. v.
Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007).
Counterclaim Defendants argue that the Amended Counterclaim consists of conclusory
allegations and fails to identify the claims being asserted. Specifically, Counterclaim Defendants
contend that Mr. Meadows’s Amended Counterclaim “provides no well-plead [sic] factual
contentions to support his claims” because “[t]here are no dates, no background facts, no facts
describing the alleged activities and no designation of which claim or claims is (are) being
asserted.”16 Counterclaim Defendants further contend that Mr. Meadows is not consistent in the
Amended Counterclaim when referring to the various parties.
Docket no. 59 at 5.
In his motion for default judgment,17 Mr. Meadows asserts that Counterclaim
Defendants’ motion to dismiss is “frivolous and meritless” because in the February 4 Order, this
court “identified several valid causes of action” in the counterclaim.18 While this court did
identify potential causes of action against Homeworx in the Original Counterclaim,19 this court
also noted that it did “not intend for this list to be restrictive or exhaustive but merely
The court makes the following observations regarding the Original Counterclaim and the
Amended Counterclaim. First, the Amended Counterclaim is substantially similar to the
Original Counterclaim but merely adds AxisPointe and Blum as additional counterclaim
defendants. Second, the Original Counterclaim was drafted and filed by Defendants’ previous
counsel. It appears to the court that Mr. Meadows was merely following the example of his
previous counsel in drafting the Amended Counterclaim and that he has not explicitly adopted
this court’s list of potential causes of action as his own in his Amended Counterclaim. Third,
While Counterclaim Defendants assert that Mr. Meadows failed to respond to their
motions, the court concludes that Mr. Meadows’s motion for default judgment was also an
opposition to Counterclaim Defendants’ motion to dismiss. Accordingly, this court will construe
it as such.
Docket no. 62 at 2.
Specifically, as stated above, this court identified the following possible causes of
action against Homeworx in the counterclaim: “breach of the Franchise Agreement . . . ,
fraudulent inducement, fraudulent misrepresentation, interference with [Mr. Meadows’s]
business relations, and violation of the covenant of good faith and fair dealing.” Docket no. 43
Docket no. 43 at n.7.
because the Original Counterclaim was against only Homeworx, it was unnecessary for Mr.
Meadows to specify which counterclaims were against which party.
While the court agrees with the Counterclaim Defendants that the Amended
Counterclaim is deficient in some respects, the court concludes that dismissing the Amended
Counterclaim would be unjust. Considering Mr. Meadows’s status as a pro se litigant, the court
has determined that Mr. Meadows should be allowed to file a second amended counterclaim that
sets forth the specific causes of action and parties to whom or to which the causes of action
apply. The court also notes that, assuming Mr. Meadows adopts this court’s identification of
potential causes of action as his own, some of those causes of action require a heightened
pleading standard under rule 9(b) of the Federal Rules of Civil Procedure. See Fed. R. Civ. P.
9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake.”); see also Sikkenga v. Regence Bluecross Blueshield of Utah, 472
F.3d 702, 727-28 (10th Cir. 2006) (“At a minimum, Rule 9(b) requires that a plaintiff set forth
the ‘who, what, when, where and how’ of the alleged fraud, [and] ‘set forth the time, place, and
contents of the false representation, the identity of the party making the false statements and the
consequences thereof.’” (citations omitted)).
Accordingly, the court RECOMMENDS that the Counterclaim Defendants’ motion to
dismiss be DENIED and their alternative motion for a more definite statement be GRANTED.
II. Mr. Meadows’s Motion
Mr. Meadows filed a motion for default judgment against AxisPointe and Blum on the
grounds that because no attorney filed an entry of appearance on their behalf, they failed to file a
responsive pleading to the Amended Counterclaim. This argument is without merit. As
explained by counsel for the Counterclaim Defendants, the filing of the motion to dismiss on
behalf of AxisPointe and Blum constituted an appearance by their counsel. See DUCivR 831.3(a) (“The filing of any pleading, unless otherwise specified, will constitute an appearance by
the person who signs such pleading, and such person will be considered counsel of record . . . .”)
Entry of a party’s default under rule 55(a) of the Federal Rules of Civil Procedure is proper only
“[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or
otherwise defend as provided by [the Federal Rules of Civil Procedure].” Fed. R. Civ. P. 55(a).
Because AxisPointe and Blum have responded to Mr. Meadows’s Amended Counterclaim by
way of a motion to dismiss and alternative motion for a more definite statement, an entry of their
default would be improper.
Accordingly, this court RECOMMENDS that Mr. Meadows’s motion for default
judgment be DENIED.
Based on the foregoing, IT IS HEREBY RECOMMENDED:
Counterclaim Defendants’ motion to dismiss be DENIED and their alternative
motion for a more definite statement be GRANTED; and
Mr. Meadows’s motion for default judgment be DENIED.
Copies of this Report and Recommendation are being sent to all parties, who are hereby
notified of their right to object. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). The parties
must file any objection to this Report and Recommendation within fourteen (14) days after
receiving it. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). Failure to object may constitute
waiver of objections upon subsequent review.
IT IS SO ORDERED.
DATED this 13th day of October, 2010.
BY THE COURT:
PAUL M. WARNER
United States Magistrate Judge
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